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Income Tax Appellate Tribunal, BENGALURU BENCH A, BENGALURU
Before: SHRI. A. K. GARODIA & SHRI. LALIET KUMAR
BEFORE SHRI. A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI. LALIET KUMAR, JUDICIAL MEMBER (Assessment Year : 2014-15) Asst. Commissioner of Income-tax, Circle -5(1)(1), Bengaluru .. Appellant v. M/s. Network Detective Agency P. Ltd. No.69/1, Kuvempu Nagar, 35th Main, 7th Cross, BTM Layout, 2nd stage, Bengaluru 560058 .. Respondent PAN : AACCN3772D Assessee by : Shri. S. Srinivasan, CA Revenue by : Shri. R. N. Siddappaji, Addl. CIT Heard on : 28.02.2019 Pronounced on : 28.02.2019 O R D E R PER LALIET KUMAR, JUDICIAL MEMBER :
This is an appeal filed by the Revenue against the order of the CIT (A), dt.14.03.2018, for the assessment year 2014-15.
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The Revenue has raised the following grounds of appeal ;
3. The ld. DR had submitted that the judgments relied upon by the CIT (A) in the matter of CIT v. Sabari Enterprises [(2008) 298 ITR 141 – Kar] and M/s. Essae Teraoka P. Ltd v. DCIT [ITA No.480/2013, dt.04.02.2014, are not applicable to the facts of the present case as these cases do not pertain to employee contribution to PF and ESI and submitted that Section 36(1)(va) is only applicable to contribution made by employees towards statutory liabilities / dues.
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Per contra, the Ld. AR has submitted that the contribution to PF and ESI were wrongly added back by the AO after relying on the CBDT circular No.22/2015, dt.17.12.2015. He has also drawn our attention to para 3 of the the judgment of the Hon’ble High Court of Karnataka in the matter of CIT v. Magus Customers Dialog P. Ltd [(2015) 371 ITR 242 – Kar], which reads as under ;
This court had an occasion to consider the said question of law in the case of CIT v. Spectrum Consultants India Pvt. Ltd. decided on December 9, 2013 in W. A. No. 4077 of 2013 [2014] 2 ITR-OL 622 (Karn) where, after referring to sections 29, 30 and 31 of the Provident Fund Act, has held as under (page 626 of 2 ITR-OL) : "A reading of the aforesaid provisions makes it clear that the contributions payable by the employer under the scheme shall be at the rate of 10 per cent. of the basic wages, dearness allowance. The contribution payable by the employee shall be equal to the contribution payable by the employer in respect of such employee. However, the employer shall, in the first instance, pay both the contribution payable by himself, i.e., the employer's contribution as well as the employee's contribution and, thereafter, he is entitled to recover by means of deduction from the employee the contribution which he has paid as employee's contribution. Therefore, in law, the payment of contribution by the employer to the fund under the scheme means both employer's contribution and employee's contribution. Whether he deducts the employee's contribution from the salary or not, in law, he is liable to pay the said amount. Therefore, section 2(24)(x) of the Act makes it clear that the employee's contribution which the employer deducts from his salary before it is paid into the fund, is treated as the income of the employer, and the employer by contributing can get the deduction. That payment must be made within the due date, i.e., the due date prescribed under section 139(1) of the Act. Because it was causing lot of problem as discussed in the judgment of the apex court, on a representation made by the industry, subsequent amendment was carried out to mitigate the difficulties caused to the employer under section 43B of the Act. Though such contributions are not paid within the time ITA.2044/Bang/2018 Page - 4
prescribed under the relevant act, if those contributions are paid before the due date prescribed under section 139(1) of the Act the employer shall be entitled to the deductions as provided under section 36(1) of the Act. While extending such benefit, Parliament has not made any distinction between the employee's contribution and the employer's contribution. It is for the simple reason,under the provident fund scheme, an employer has to pay both the contribution and then recover from the salary of the employee. Therefore, in view of the aforesaid judgment, we do not find any sub stance in this appeal. Therefore, the appeal is dismissed." On the basis of the above, it was submitted that order of the CIT (A) is correct.
We have heard the rival contentions and perused the record. In para 5.1, 5.2 and 5.3, the CIT(A) held as under ;
5.1 I have considered the written submission of the AIR, statement of facts and the grounds of appeal. I have also perused the assessment order. In the assessment order the AO has observed as under: As per the 3CD report there is a delay in payment of employees contribution towards EPF & ESI. The details are as under: Employees contribution of EPF: Month Amount Remitted Due date Date of Amount (Rs) Deducted (Rs) Remittance Apr-13 755030 765030 20.05.2013 28.05.2013 May-13 830612 830612 20.06.2013 30.06.2013 Jun-13 829050 829050 20.07.2013 26.07.2013 Jul-13 861636 861636 20.08.2013 23.08.2013 Aug-13 874242 874242 20.09.2013 24.09.2013 Sep-13 880738 880738 20.10.2013 26.10.2013 Oct-13 885168 885168 20.11.2013 29.11.2013 Nov-13 906129 906129 20.12.2013 28.12.2013 Dec-13 921755 921755 20.01.2014 28.01.2014 Jan-14 966103 966103 20.02.2014 27.02.2014 27.03.2014 Feb-14 970536 970536 20.03.2014 29.04.2014 Mar-14 970445 970445 20.04.2014 1,06,61,444 TOTAL 1,06,61,444 ITA.2044/Bang/2018 Page - 5
Employees contribution to ESI:
Date of Due Amount Month Amount Remitted (Rs) date Remittance Deducted Rs) 28.05.2013 21.05.2013 259759 259759 Apr-13 21.06.2013 30.06.2013 282627 282627 May-13 21.07.2013 26.07.2013 276015 276015 Jun-13 21.08.2013 23.08.2013 Jul-13 278844 278844 21.09.2013 24.09.2013 286142 Aug-13 286142 21.10.2013 26.10.2013 290756 290756 Sep-13 21.11.2013 29.11.2013 Oct-13 293550 293550 21.12.2013 28.12.2013 293799 293799 Nov-13 21.01.2014 28.01.2014 Dec-13 298947 298947 21.02.2014 27.02.2014 309133 Jan-14 309133 21.03.2014 27.03.2014 313633 Feb-14 313633 21.04.2014 29.04.2014 Mar-14 309060 309060 34,92,265 TOTAL 34,92,265 It is clear from the above that the assessee company has delayed the payment of employees contribution towards EPF & ESI much after the extended due date for payments as per the relevant Acts, that is including the grace periods. The issue here is the contributions of employee towards these funds maintained by the employer. This has to be read with section 2(24)(x) of the 1.T. Act and 36(1)(va) of the I.T. Act. As per section 2(24)(x), any contribution to PF, superannuation fund, gratuity fund etc., received by the assessee from his employees is deemed to be the assessee's income. As per section 36(1)(va), any sum receivable by the assessee from any office employees to which the provisions of sub- clause (x) of clause (24) of section to apply, if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date. Due date for the purposes of this clause is referred to the date by which the assessee is required to deposit in the relevant fund under any Act, Rule etc. Since, such receipts have not been deposited within the due date prescribed under the respective Acts, the said sums are do not qualify for allowance as expenditure u/s 36(1)(va) of the Act and brought to tax. As per Board's circular 22/2015, dt: 17.12.2015 it is categorically stated that employee's contribution are covered by the provisions of section 36(1)(va). Hence, a sum of Rs. 1,06,61,444/- + Rs. 34,92,265/- = Rs. 1,41,53,709/- is disallowed and brought to tax. 5.2 The issue of deposit of contribution to EPF and ESI is settled now. Various courts of have held that if the amount is deposited before filing of the return of income u/s 139(1) of the Act no disallowance can be made by the AO on this account. The delay in remittance of the employees contribution to EPF and ESI in the instant case is that of a few days only. A perusal of the assessment order shows that the amounts were deposited within the FY 2013-14 or much before the due date for filing the return of income u/s 139(1) of the Act.
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5.3 The issue has been dealt with by the jurisdictional High‘court in the cases of CIT vs Sabari Enterprises 2008 298 ITR 141 KAR, dt 3 July, 2007 and M/S. EssaeTeraoka Pvt. Ltd vs The Deputy Commissioner Of Income- tax ITA.NO.480/2013 dt4 February, 2014, and the same was decided against the revenue. Further on similar issue the SLP of the department was dismissed by the Hon'ble Supreme Court in the case of Principal Commissioner of Income-tax, Jaipur. v. Rajasthan State Beverages Corporation Ltd. [2017] 84 taxmann.com 185 (SC) dt July 4, 2017. So considering the above binding decisions, the disallowance made in respect of amounts deposited on or before the due date of filing the return of income under Section 139(1) of the Act is required to be deleted. Further we find that the issue of disallowance of delay in payment of contribution by the assessee towards employee PF and ESI would have been examined by the hon’ble jurisdictional High Court in the matter of Magus Customers Dialog P. Ltd (supra), therefore we do not find any merit in the appeal of the Revenue. Respectfully following the judgment of the Hon’ble jurisdictional High Court, we dismiss the appeal of the Revenue.
In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on 28th day of February, 2019.